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While the Mexican IMEF manufacturing index bucked the global trend and increased in August, there is no hiding from the weak outlook for the economy. With GDP growth set to disappoint, we expect interest rates to remain low and the next move is much more …
7th September 2011
Data released this afternoon confirm that Brazilian inflation rose further above the central bank’s target in August. The news will do little to calm fears that, following last week’s surprise interest rate cut, policymakers have gone soft on inflation. …
Argentina’s recent economic performance masks a series of debilitating distortions which threaten to undermine the nation’s future growth prospects. With regime change seemingly unlikely, we believe that the economy will slip into recession over the …
6th September 2011
Brazil’s economy grew by a solid if not spectacular 0.8% q/q in Q2, but leading indicators suggest that it will struggle to expand at half that pace in Q3. … Brazil: Q2 GDP data solid, Q3 looking …
3rd September 2011
The surprise decision to cut Brazilian interest rates earlier this week has raised the prospect of rate cuts elsewhere in Latin America. If the developed world does eventually slide into recession then monetary policy will be loosened throughout the …
After last night’s surprise 50bps cut in interest rates, further monetary easing in Brazil will depend on how events elsewhere in the global economy play out. We doubt that rates will be cut as quickly as they were in 2008-09, but we do expect them to …
2nd September 2011
Above-target inflation means that it would require a major shock to the global economy for the Mexican central bank to cut interest rates this year. But with growth set to slow by more than most expect over the course of 2012, there is a much greater …
31st August 2011
Peru’s economy witnessed a moderation of growth in Q2 as investors reacted to the emergence of new President Ollanta Humala. While growth will cool further in the near-term on a weaker external picture, healthy domestic demand and solid fundamentals …
Financial markets in Latin America suffered heavy losses during the recent global market turmoil, extending their poor performance so far this year. Equity markets fell by around 15% amid a widespread sell-off at the start of August, although they have …
25th August 2011
The Central Bank of Colombia’s (BANREP) decision to hold interest rates at 4.5% was prompted by the recent uncertainty in the global economy. Rate hikes may resume once the current market turmoil has blown over. But with the economy exhibiting all of the …
23rd August 2011
Data released this afternoon show that the Mexican economy registered decent growth in the first half of this year. Nevertheless, with the news from the US going from bad to worse, and domestic demand unlikely to fully take up the slack, we think that the …
20th August 2011
There were no surprises from Chile’s Central Bank (CBC) last night as the benchmark rate was maintained at 5.25%. With global demand set to slow but not collapse altogether, the likelihood of further tightening has narrowed considerably and we now expect …
Today’s Chilean GDP figures confirmed that the economy remained in good health over the second quarter. Even so, we are likely to witness a weaker performance from Q3 on the back of deteriorating external demand conditions and lower base metals prices. So …
19th August 2011
The Venezuelan President, Higo Chavez, has announced that he intends to nationalise the country's gold industry and repatriate gold reserves from abroad. With the dollat drought that blughted to economy last year set to return as oil prices …
Brazilian growth appears to have eased a little in the second quarter of this year and, thanks to a weak end to Q2 and the recent turmoil in markets, looks set to slow yet further in Q3. The question is whether this is a temporary soft patch or the …
18th August 2011
The recent turmoil in the financial markets has re-shaped the debate on how far interest rates may need to rise in Latin America. We still expect one or two more hikes in Peru, Colombia and perhaps even Chile, but rates have probably now peaked in Brazil. …
Peru’s growth rate cooled over the second quarter of this year as weak domestic industry continued to drag on growth and investment suffered from electoral uncertainty. Going into Q3 we expect activity to slow further as a weakening external environment …
16th August 2011
Peru’s Central Bank (BCRP) kept interest rates at 4.25% for the third successive month last night as policymakers wait to see if the worst of the global market storm has passed over. In the very near-term, financial market turbulence will continue to …
13th August 2011
The latest Mexican Inflation Report confirms that policymakers are in no mood to begin monetary tightening. The recent global market turmoil underlines that the downside risks to Mexican growth that we have warned about for some time reinforces our view …
12th August 2011
The slump in financial markets across Latin America means that valuations now look fairly cheap. But while this could lead to a rally in equities once the panic of the past few days subsides, the recent market mayhem serves as a timely reminder that the …
10th August 2011
Slowing inflation in Chile raises the probability of a second successive pause at this month’s monetary policy meeting. What’s more, a weakening external backdrop will make policymakers more reluctant to tighten rates further over the remainder of the …
9th August 2011
Despite benefiting from generally better fundamentals, no emerging market (EM) is immune from the deepening problems in the US and Europe. Growth everywhere is likely to slow over the next year and, while Asia should continue to outperform, we are …
Mexico became the latest country to release a disappointing manufacturing survey last night. Weak industrial activity, coupled with sluggish growth in the service sector and the ongoing problems in the US, mean that we are revising down our Mexican growth …
5th August 2011
The slump in Brazilian industrial production in June tips the balance in favour of interest rates being left unchanged (rather than hiked) later this month, and suggests that the tightening cycle has probably ended. Over the next six-twelve months …
3rd August 2011
A further drop in the PMI manufacturing survey last month suggests that the outlook for Brazilian industry has continued to weaken. Relentless appreciation of the real is squeezing the tradable sector, even as the government steps up its efforts to curb …
2nd August 2011
The Central Bank of Colombia (BANREP) raised interest rates by 25bps to 4.5% late on Friday night. Strong activity data and rising inflation may prompt some further hikes in the very near term. But, with inflation set to ease next year, we expect concerns …
Fiscal profligacy and a lack of prudence in managing commodity revenues have left Ecuador highly exposed to a downturn in global oil prices. Limited financing options are likely to turn up the heat on the dollarised economy over the medium-term. … …
30th July 2011
The fact that Latin America is spending its windfall from higher commodity prices is good news for the global economy, but carries significant risks for the region itself. In the near term the big risk is that the current boom in consumer spending proves …
29th July 2011
Policymakers in most of Latin America’s inflation-targeting countries have begun to signal an end to the current cycle of monetary tightening. In the very near term, we still expect the combination of rapid credit growth and rising inflation to trigger …
28th July 2011
The Brazilian Central Bank (BCB) hiked interest rates by 25bps to 12.50% last night. The tone of the accompanying statement suggests that rates may now have peaked, although we wouldn’t rule out another 25bps increase at the next meeting. Either way, the …
22nd July 2011
On the face of it, there is early hope that the Colombian economy has begun to rebalance away from domestic demand-led and towards export-led manufacturing growth. But with the exchange rate still appreciating and consumer credit growth booming, we think …
21st July 2011
There has been a growing debate in recent weeks over the extent to which Peru’s economy has slowed, with some commentators foretelling a collapse in growth. A closer inspection of the latest data, however, suggests that as things stand the cause for …
20th July 2011
The recent spike in food inflation has a little further to run and, in most economies, core inflation pressures are building. But even so we still expect headline inflation to start to fall in pretty much every country in the region from around Q4 of this …
19th July 2011
The Central Bank of Chile (CBC) as expected held interest rates at 5.25% last night. Strong domestic conditions and above-target inflation make further increases likely, but we are nearing the end of the current tightening cycle. We maintain our forecast …
16th July 2011
The debate about whether or not Brazil is in the midst of a consumer credit bubble has reached fever pitch over the past few days. Our view is that the current pace of credit growth is unsustainable and that, as such, there is a growing risk of a sharp …
13th July 2011
The Central Bank of Peru (BCRP) held interest rates at 4.25% for the second consecutive month last night. With investment spending and inflation set to accelerate later this year, we continue to expect rates to rise further although the risks to our …
9th July 2011
Growth in Argentina has shown few signs of slowing in 2011 and we remain concerned about overheating and a hard landing further ahead. Excessively loose policy continues to fuel booming domestic demand and October’s Presidential elections make any …
8th July 2011
News that Brazil is planning a range of new measures to stem the rise in the real hit the currency yesterday but any such action is unlikely to have a lasting impact. … Fresh controls unlikely to signal end of Brazil’s ‘currency …
7th July 2011
June’s IMEF surveys suggest that the Mexican economy picked up a little pace in the second quarter of this year. Nonetheless, growth remains sluggish compared to the rest of the region and with the US economy set to slow over the next 12-18 months, there …
6th July 2011
The sharp rise in Brazilian industrial production in May largely reflects a rebound from the drop in output seen in April. The sector has broadly stagnated over the past couple of months and the fall in June’s manufacturing PMI to below 50 suggests …
2nd July 2011
Fears of a widespread bubble in emerging markets look overdone, but there are growing signs that rapid capital inflows are stoking problems in several countries. We think the biggest risks lie in Turkey and Brazil, where the threat of a sharp downturn in …
The relative valuations of emerging market equities and bonds are no longer as attractive as they have been in the past. But the fears of overheating and hard landings that have held many back so far this year are generally exaggerated or at least …
1st July 2011
Financial markets across Latin America have had a fairly torrid time over the past month or so. Fears of a renewed global slowdown and a subsequent drop in commodity prices, along with worries about rising domestic inflation, have caused most equity …
30th June 2011
Data showing that the Colombian GDP grew at close to 8% annualised in the first quarter of this year, despite the impact of the heaviest rains in three decades, adds to recent evidence that the economy is in rude health. Yesterday’s decision to by Fitch …
24th June 2011
The fact Brazil is spending its windfall from higher commodity prices – plus more – is good news for the global economy, but carries significant risks for the country itself. In particular, it means that a substantial drop in commodity prices would bring …
23rd June 2011
The Central Bank of Colombia (BANREP) hiked interest rates by 25bps to 4.25% on Friday night. Although policymakers softened their tone from previous meetings, we still expect rising inflation to ensure that rates reach 5.0% by year-end before remaining …
21st June 2011
Central bankers – and some in the markets – appear increasingly hopeful that the recent spike in food price inflation, which has driven headline inflation above its target in pretty much every country in the region, will now start to ease. We think this …
17th June 2011
The Central Bank of Chile (CBC) raised interest rates by 25bps to 5.25% last night but signalled that, while more hikes are likely over the coming months, we are now approaching the end of the current tightening cycle. We are sticking to our forecast for …
16th June 2011
The Central Reserve Bank of Peru (BCRP) unexpectedly held interest rates at 4.25% last night. Nonetheless, if it emerges over the coming weeks that President-elect, Ollanta Humala, will broadly maintain the current economic framework, as we expect, then …
11th June 2011
The Brazilian Central Bank (BCB) hiked interest rates by 25bps to 12.25% last night. With inflation, which exceeded the Bank’s target range last month, set to rise further, additional increases are likely over the coming months. We expect the Selic rate …
9th June 2011
